How Community Land Trusts Can Advance Black Homeownership

April 27, 2022

In 2020, the U.S. homeownership rate rose a record high amount, but over the same period, the Black homeownership rate fell below its level recorded a decade ago, as the National Association of Realtors reported in February.

And with COVID-19 mortgage forbearance plans ending, there is concern that the homeownership gap will expand. To be proactive and anticipate this increase, communities may want to consider homeownership models that increase accessibility for Black homeowners.

Community land trusts, nonprofits that offer shared-equity homeownership, are one potential model.

The Damage to Black Homeownership

The Black homeownership rate in 2020 was the lowest of all racial groups' at 43.4%, while in 2010 it was 44.2%, according to the National Association of Realtors report.

This damage occurred because of losses during the Great Recession, according to an essay in the 2021 book, “The Future of Building Wealth.”

“Black and Hispanic borrowers, who were disproportionately set up for foreclosure with predatory loans, lost their homes at around 1.8 times the rate of white borrowers,” during that time, wrote the authors of the essay, “Black Homeownership Matters (PDF),” which cited figures from a 2010 report (PDF).

How can community land trusts help address the racial gap?

Short Primer on Community Land Trusts

Organizations including Community Legal Resources Community Land Trust Project (PDF) and provide information on community land trusts and how they work. Here’s a short overview.

Where they came from

A CLT is a model of shared-equity homeownership that emerged during the civil rights movement and was started by Black farmers to combat oppression, violence and eviction in the American South, as Grounded Solutions Network describes.

What they do

CLTs are nonprofit organizations that acquire and manage land upon which affordable homes can be developed. CLTs sell these homes to low-and-moderate income families at below-market rates but retain ownership of the land.

What homebuyers do

Homebuyers lease the land from CLTs for a nominal fee. In exchange for a CLT property at an affordable price, buyers agree to resell at a price that is affordable for future low-income owners.

How CLTs can be used

CLTs typically qualify for a 501(c)(3) charitable organization designation. Besides for needed homes, CLT land can be used for a variety of community needs—small businesses, commercial spaces, community gardens and rental housing.

What effects they can have

By requiring homeowners, tenants and neighborhood residents to have an active role in governance, CLTs transfer leadership, power and decision-making to residents, with a tool to:

  • combat potential gentrification,
  • preserve the neighborhood’s unique character, and
  • reduce displacement of long-term residents.

Benefits and Challenges of Community Land Trusts

No single solution will close the racial homeownership gap, but it is important to consider solutions that advance racial equity in housing. Below are some of the benefits and challenges associated with the CLT model.

Benefits: Investment, Wealth Creation, Community Building

Efficient Investment—As we enter a period of recovery, state and municipal governments are trying to recover from significant losses in revenue, increased spending and the impact of the pandemic. Affordable housing models that make the most of each dollar invested may help. Community land trusts build and retain the effect of a one-time initial public or philanthropic investment through resale price restriction and equity-sharing agreements that provide affordability in perpetuity.

Wealth Creation—CLTs have been shown to build wealth for homeowners of color. A 2019 study conducted by Grounded Solutions Network, in partnership with the Lincoln Institute of Land Policy and Freddie Mac, found that the majority of lower-income families who participated in shared-equity homeownership were able to leverage it to purchase market-rate homes within a five- to seven-year period.

Affordability Preservation—With housing prices soaring, there is a growing opportunity to invest in ways that make housing affordable now and stretch that investment to protect the home as affordable for future generations. Affordable housing models that require a subsidy investment typically do not provide affordability in perpetuity.

Stronger and Equitable Communities—The inclusion of resident leaders and resident owners in governance allows leadership and decision-making for CLTs to be resident-led and community-based.

Stability—CLTs can help to stabilize neighborhoods by preserving access to land and housing over time. A 2011 Lincoln Institute of Land Policy study of shared-equity homeownership performance during the Great Recession found that conventional homeowners were 10 times more likely to be in foreclosure proceedings than CLT homeowners at the end of 2010.

Challenges of CLTs: Scale, Capacity, Funding

Scale—The primary challenge facing the community land trust sector is the ability to scale up. Shared-equity homes of all types remain well below 1% of the nation’s housing units.

“Grounded Solutions Network estimated in 2018 that there were 12,000 CLT homeownership units, at an average of 72 units per CLT (excluding those with none),” according to a July 13, 2021, article in community development publication Shelterforce.

CLTs are not the only solution, but rather a supplement to a whole host of solutions to improve accessibility.

Capacity—There is a limited number of experts who are knowledgeable about shared-equity models who can provide assistance to nonprofits interested in forming CLTs, which creates a constraint on the ability to scale up the model.

The St. Louis Fed's Community Investment Explorer data tool (CIE 2.0)

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The St. Louis Fed’s Community Investment Explorer data tool (CIE 2.0) shows how funding from community development programs like the Community Development Block Grant and HOME programs has been distributed.

Funding—Investments are lacking to cover the difference between the fair market value or construction/acquisition-rehab costs of a home and the sale price that is affordable to a lower-income household. While funding levels for some federal homeownership programs, like HOME (HOME Investment Partnerships Program) and CDBG (Community Development Block Grant Program), have declined or stagnated, local governments have placed a higher priority on affordable rentals than on homeownership, as a May 18, 2018, Shelterforce article reported.

Interest in CLTs Is Growing

Interest in developing CLTs has gained traction among community organizations and governments seeking solutions to advancing equitable housing outcomes. More research is necessary to understand how CLTs can contribute to increasing Black homeownership while maintaining affordability.

To learn more about a CLT within the Eighth District, visit the website of Binghampton Community Land Trust located in Memphis, Tenn.

About the Author
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Faith Weekly

Faith Weekly is a community development advisor for the St. Louis Fed's Louisville Zone. Read more about Faith's work.

Woman with dark hair in business attire
Faith Weekly

Faith Weekly is a community development advisor for the St. Louis Fed's Louisville Zone. Read more about Faith's work.

This blog explains everyday economics, consumer topics and the Fed. It also spotlights the people and programs that make the St. Louis Fed central to America’s economy. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.

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